Correlation Between Verizon Communications and APA
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and APA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Verizon Communications and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and APA Corporation, you can compare the effects of market volatilities on Verizon Communications and APA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Verizon Communications with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and APA.
Diversification Opportunities for Verizon Communications and APA
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Verizon and APA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Verizon Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Verizon Communications are associated (or correlated) with APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Verizon Communications i.e., Verizon Communications and APA go up and down completely randomly.
Pair Corralation between Verizon Communications and APA
Assuming the 90 days horizon Verizon Communications is expected to generate 0.9 times more return on investment than APA. However, Verizon Communications is 1.11 times less risky than APA. It trades about 0.08 of its potential returns per unit of risk. APA Corporation is currently generating about -0.04 per unit of risk. If you would invest 59,849 in Verizon Communications on September 14, 2024 and sell it today you would earn a total of 25,952 from holding Verizon Communications or generate 43.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. APA Corp.
Performance |
| Timeline |
| Verizon Communications |
| APA Corporation |
Verizon Communications and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and APA
The main advantage of trading using opposite Verizon Communications and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, APA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in APA will offset losses from the drop in APA's long position.| Verizon Communications vs. ATT Inc | Verizon Communications vs. Vodafone Group Plc | Verizon Communications vs. Telefnica SA |
| APA vs. UnitedHealth Group Incorporated | APA vs. Micron Technology | APA vs. Verizon Communications | APA vs. First Majestic Silver |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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